Technological lock-in

Technological lock-in refers to macro level forces that create systematic barriers to the diffusion and adoption of efficient and sustainable technologies. The term arises from the recognition that acheiving greater environmental quality without limiting productive activity requires efforts to promote innovation in clean technologies. Nevertheless, there is a growing consensus on the potential for environmental improvement that could be achieved through the diffusion of the clean technologies that already exist, in particular in terms of improved energy efficiency and the consequent reduction in the emissions associated with the use of fossil fuels. The question then becomes: What is holding back the diffusion of these existing technologies? The debate basically rests on the cost of transition to these new technologies. This is an issue which has been approached from two opposing perspectives: 1) aggregate economic models (a top-down approach); and 2) engineering studies (a bottom-up approach). According to various authors, both approaches rely on excessively simplistic assumptions about the dynamic of energy substitution and the process of technological change. A broader and evolutionary view of the process of technological change shows how an important barrier to the diffusion of clean technologies arises from the fact that the economic system can be locked-in to technology standards which are potentially environmentally inferior.

This lock-in is due to the existence of significant increasing returns to adoption of energy technologies, produced by economies of scale, learning and networks, arising out of the integrated and systemic nature of these technologies. Under these conditions, the same distribution of technologies and user preferences can lead to different structures in the breakdown of the user market, depending on how things start out. The system therefore has a multiplicity of equilibria which, when expressed in terms of market shares, can be interpreted as a succession of spontaneous or de facto standards. Spontaneous standards emerge as a result of internal market processes and not as the result of a coordinated action by its participants. Early superiority, however, is no guarantee of long-term suitability. Thus, in the presence of increasing returns, apparently inferior designs can become locked in to the production system in a historically dependent process in which circumstantial events determine the winning alternative.